BHP Billiton’s iron ore production rises but gas slips

Tugs bringing a bulk carrier alongside the Port Hedland Port Authority’s Utah bulk export facility.

Rising seaborne iron ore supplies over the next two quarters will probably overwhelm weak demand from mills in China, according to Goldman Sachs, which said that a global glut was entering its second year.

BHP Billiton iron ore president Jimmy Wilson said the project would mitigate the risk of a channel blockage by ensuring the continued safe escort of vessels in and out of Port Hedland’s Inner Harbour.

Further productivity improvements would contribute to an increase to 290 million tonnes a year over time, BHP said.

Western Australia iron ore production increased 13% to a record 254 million tonnes on top of productivity gains, beating its own target of 250 million tonnes.

Investors gave the report a fairly neutral reaction, with BHP Billiton shares down 0.6 per cent to $26.67, while its main rival Rio Tinto was off 0.8 per cent.

The Melbourne-based company also announced it has taken an impairment of $350 million to $650 million, mainly on its copper assets, including its Cerro Colorado mine in Chile, and a reduction in the number of rigs being used within its onshore US petroleum unit.

“The widening in bond spreads and the increase in credit-default swap prices are a commodity sector issue and BHP Billiton has been moving consistently with our peers”, the miner said in an e-mailed statement on Monday.

However, that growth is unlikely to continue with oil prices now sitting just about $US50 a barrel and BHP having recently announced that it would cut investment in its United States onshore oil and gas operations. But copper production was flat at 1.7 million tonnes, while metallurgical coal production was up 13 per cent to 43 million tonnes.

Commenting on the results, BHP Billiton’s Chief Executive Officer Andrew Mackenzie said: “Our simpler portfolio following the demerger of South32 will help us maintain the pace of…”